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Is Fidelity Magellan Fund (FMAGX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Large Cap Blend category, but where should you start your research? Well, one fund that might be worth investigating is Fidelity Magellan Fund (FMAGX - Free Report) . FMAGX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FMAGX is classified in the Large Cap Blend segment by Zacks, which is an area full of potential. Targeting companies with market caps of more than $10 billion, Large Cap Blend mutual funds offer a stable investment choice; these funds are perfect for investors with a "buy and hold" mindset. Since blended funds mix large, more established firms into their portfolios, investors are exposed to both value and growth opportunities.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FMAGX. Since Fidelity Magellan Fund made its debut in May of 1963, FMAGX has garnered more than $15.02 billion in assets. The fund is currently managed by Jeffrey S. Feingold who has been in charge of the fund since September of 2011.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 16.42%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 11.48%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FMAGX's standard deviation comes in at 10.91%, compared to the category average of 9.55%. The fund's standard deviation over the past 5 years is 10.31% compared to the category average of 9.9%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. FMAGX lost 58.26% in the most recent bear market and underperformed its peer group by 8.59%. This might suggest that the fund is a worse choice than its peers during a bear market.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.04, which means it is hypothetically more volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. FMAGX has generated a positive alpha over the past five years of 0.01, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 80.99% of its assets in stocks, with an average market capitalization of $195.35 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Industrial Cyclical

Turnover is 51%, which means, on average, the fund makes fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FMAGX is a no load fund. It has an expense ratio of 0.67% compared to the category average of 1%. FMAGX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Fidelity Magellan Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.




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